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2022 (3) TMI 809 - HC - FEMAOffence under FEMA - enquiry contemplated under Section 16(3) of the Foreign Exchange Management Act, 1999 on the basis of complaint by an Authorized officer as provided for under the said sub-section - As argued show-cause notices are not in compliance with the procedure prescribed under Rule 4 of 2000 Rules - HELD THAT - We are of the view that no indulgence is warranted in the matter of issuance of impugned show-cause notice dated 08.04.2021 and the notice for personal hearing dated 28.06.2021. Adjudicating Authority is yet to hold an enquiry and thereafter take a decision to initiate proceedings for imposition of penalty under Section 13 of the FEMA. Thereafter, the petitioner has a remedy of filing appeals viz. (1) under Section 17 to the Special Director (Appeals) against the orders of the Adjudicating Authorities, being an Assistant Director of Enforcement or a Deputy Director of Enforcement; (2) under Section 19 to the Appellate Tribunal against the order made by an Adjudicating Authority other than those referred to in sub-section (1) (2) of Section 17, or the Special Director (Appeals); and (3) under Section 35 to the High Court against the order of Appellate Tribunal. Though the petitioners complain of not being able to file reply on merits against the impugned show-cause notice, nevertheless there is no reason forthcoming as to why the petitioners have not attended the office of prescribed Authority as indicated in the impugned notice for inspection of documents attached with the complaint. Be that as it may, while responding to the notice dated 28.06.2021 for personal hearing, petitioners are always free to seek the opportunity for inspection of documents and file reply. Petitioners may raise all questions on facts and in law available to them in the context of the enquiry under Rule 4 of 2000 Rules. The Adjudicating Authority shall be well advised to consider the reply during the course of proceedings. Four weeks' time, as prayed for, is granted to inspect the documents, if so advised, and file reply. Adjudicating Authority shall complete proceedings within eight weeks thereafter keeping in mind the time bound completion of proceedings as ordered bearing in mind the provisions of sub-section 6 of Section 16 of FEMA.
Issues Involved:
1. Validity of the impugned show-cause notices dated 08.04.2021 and 28.06.2021 under Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. 2. Compliance with the principles of natural justice and procedural requirements. 3. Petitioners’ failure to respond adequately to the show-cause notices. 4. Jurisdiction of the High Court under Article 226 of the Constitution of India to entertain the writ petition challenging the show-cause notices. Detailed Analysis: 1. Validity of the Impugned Show-Cause Notices: The petitioners challenged the show-cause notices dated 08.04.2021 and 28.06.2021 issued under Rule 4(1) and 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. The notices were issued in connection with an enquiry under Section 16(3) of the Foreign Exchange Management Act, 1999 (FEMA), based on a complaint by an authorized officer. The petitioners contended that the notices were issued without awaiting their reply and without forming a proper opinion, thus rendering the notices invalid. The court, however, found that the Adjudicating Authority had prima facie found a case of contravention of FEMA provisions and had provided the petitioners with an opportunity to inspect the documents relied upon. The court held that the formation of opinion by the Adjudicating Authority was based on relevant material and could not be faulted. 2. Compliance with the Principles of Natural Justice and Procedural Requirements: The petitioners argued that the procedure adopted by the Adjudicating Authority violated the principles of natural justice and the regulated procedure under Rule 4 of the 2000 Rules. They contended that they were not given adequate time to respond to the show-cause notice due to the Covid-19 pandemic and the requirement of old records. The court noted that the petitioners had received the show-cause notice on 22.05.2021 but only submitted a reply on 17.06.2021, seeking more time. The court observed that the petitioners did not take the opportunity to inspect the documents provided by the Adjudicating Authority. The court held that the principles of natural justice were adhered to, and the petitioners were given a fair opportunity to respond. 3. Petitioners’ Failure to Respond Adequately to the Show-Cause Notices: The court found that the petitioners had not adequately responded to the show-cause notices. Despite being given the opportunity to inspect the documents and respond, the petitioners failed to do so within the stipulated time. The court held that the petitioners' lapse in inspecting the documents and filing a comprehensive reply could not be used to assail the validity of the show-cause notices. 4. Jurisdiction of the High Court under Article 226: The court reiterated the settled law that it generally does not interfere with show-cause notices under Article 226 of the Constitution unless the notices are without jurisdiction or issued without any legal basis. The court referred to the judgments of the Hon'ble Supreme Court in *Special Director And Another Vs. Mohd. Ghulam Ghouse And Another* and *Raj Kumar Shivhare Vs. Assistant Director, Directorate of Enforcement and Another*, emphasizing that statutory forums should be used for redressal of grievances in fiscal matters. The court held that the petitioners should respond to the show-cause notices and raise all factual and legal issues before the Adjudicating Authority. Conclusion: The court dismissed the writ petition, holding that the impugned show-cause notices dated 08.04.2021 and 28.06.2021 were valid and issued in compliance with the procedural requirements and principles of natural justice. The court granted the petitioners four weeks to inspect the documents and file a reply, and directed the Adjudicating Authority to complete the proceedings within eight weeks thereafter. The petitioners were advised to raise all their objections during the course of the adjudication proceedings.
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